European stocks close up 1.2%, pare sharp losses

Energy shares tracked oil prices higher and helped European equities rebound more than one per cent yesterday, paring the previous session's two per cent fall.

Total advanced 1.7 per cent and Royal Dutch Shell gained 2.3 per cent as US crude oil prices jumped nearly two per cent to $96.4 a barrel.

Miners were also higher, with bid target Rio Tinto up 2.2 per cent and Anglo American gained 3.6 per cent.

Recently beaten-down banks including Barclays and Royal Bank of Scotland also jumped as traders cited vague talk of a cut in the Bank of England's emergency rate.

The pan-European FTSEurofirst 300 index closed 1.2 per cent stronger at 1,479.9, just shy of the day's high of 1,481.9 and up sharply from the session's low of 1,453.8. US markets also traded higher.

"The reasons for having a positive stance on equities is that global growth is all right and the outlook for growth next year is good," said Rob van de Wijngaert, acting head of investment strategy at ABN Amro Asset Management.

"Still, for the shorter term, we are cautious, mainly because we don't think it's over yet. While the banks are going through their books, there will be more bad news coming out."

The FTSEurofirst 300 is little changed on the year compared with a 15 per cent rise at this time last year, punctured by worries that a credit crunch stemming from a crisis in risky US mortgages would spread to the wider economy.